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Friday March 9, 2007 - 10:12:07 GMT
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ACM - www.ac-markets.com
Dollar rises against low-yielder ahead of US payrolls
By Jean-Claude Braha - ACM Senior Trader
News and Events:
The Dollar climbed against the Yen and CHF, with investors feeling a bit more comfortable buying riskier assets financed by borrowing low-yielding currencies, before the US payrolls report. But investors remain cautious about going back into large positions anticipating more Yen weakness rally when a sudden spike in risk aversion pushed up the Japanese currency to 3-month highs and sent global equity markets lower.
Following European Central Bank decision to raise its benchmark to 3.75%, Mr. Trichet said rates in the region were moderate and monetary policy was on the â€śaccommodative sideâ€ť. In the past Mr. Trichet has described Euro-zone rates as low. His less hawkish commentary than expected added uncertainty about how much narrower the gap between US and Euro interest rates could become. The Euro fell against the Dollar -0.3% to 1.3138. But EurChf strengthened 0.62% to 1.6127.
Yen also fell, correcting from recent highs, against the Euro and the Dollar as a rate hike in Europe and a rebound in global stock prompted investors to sell the Yen to buy higher-yielding assets. EurYen rose 0.97% to 153.93 and UsdYen was up 1.27% to 117.16.
Sterling erased previous day gains against the Dollar after the Bank of England held rates at 5.25% as expected. It disappointed only a minority of traders who had been speculating about the possibility of a surprise rate hike. GbpUsd was unchanged at 1.9295 and GbpJpy rose 1.25% to 226.06.
Investors await today US employment report, looking for any weakness in the data which would lower expectations that the Federal Reserve may cut interest rates later this year. If today US employment report shows weaker-than-expected jobs growth, dealers may continue to cut back on risky positions on the view economic growth is slowing. Forecast among an economist pool is anticipating a gain of 100k jobs in February, while other reports this week have raised speculation that the figure could be even lower.
Today's Key Issues:
GB 9:30 GMT: January Industrial Production expected 0.2% vs -0.1% (MoM) and 0.5% vs 0.4% (YoY). January Manufacturing Production expected 0.2% unchanged (MoM) and 2.4% vs 2.3% (YoY).
Euro 11:00 GMT: January Euro-zone OECD Leading Indicator previously 109.3
CAD 12:00 GMT: February Unemployment Rate expected 6.2% unchanged
US 13:30 GMT: January Trade Balance expected -$59B to -$60B vs -$61.2B. February Change in Non-Farm payrolls 100k vs 111k and Unemployment rate 4.6% unchanged
US 15:00 GMT: January Wholesale Sales expected -0.5% vs 1.8% and Wholesale Inventories 0% vs -0.5%
US 17:30 GMT: Fed's Bies speaks at Charlotte Risk Management Conf.
US 18:30 GMT: Fed's Kohn and Kroszner speak at Washington Inflation Conference.
The Risk Today:
EurUsd is consolidating above support at 1.3073. While this level holds, the outlook remains mildly positive - a break above nearby 1.3189 minor resistance (61.8% of 1.3261-1.3072) is required to confirm a return of the underlying bull trend from the 1.2685 mid-January low, opening the door toward the 1.3260 late-February trend high. On the downside, a break of 1.3074 would confirm the short term negative trend and expose further downside toward 1.3024. There market would target 1.2990 (61.8% retracement of the 1.2865 to 1.3191 advance).
GbpUsd remains heavy after the recent break of the bottom of the large trading range at the 1.9402 Mid-February low. Focus remains on the 1.9146 Pivot support from last November. Initial resistances are 1.9360, therefore resistance at the 1.9403 should cap the upside for the near term.
UsdJpy recent bounce from 115.15 appears corrective. UsdJpy is still under pressure following the sharp losses over last week, despite the recent move above 117. Only a clear break above 117.44 resistance to 118 pivot area would put the bear on hold in the short term. Until then, note that there is little support below 115.15 until the 114.44 support.
UsdChf recent recovery from Monday's low 1.2109 cleared 1.2263 minor resistance. Further advance would offset the broader downward pressure from the 1.2575 late January high. Until then, note that there is little support below the current 1.2109 trend low until 1.2030 trendline support and 1.1980 December low.
Resistance and Support:
|EURUSD ||GBPUSD ||USDJPY ||USDCHF |
|1.3364 T ||1.9750 S ||119.90 K ||1.2575 S |
|1.3290 T ||1.9403 S ||118.00 P ||1.2477 S |
|1.3250 S ||1.9360 M ||117.44 S ||1.2296 M |
|1.3145 ||1.9295 ||117.40 ||1.2285 |
|1.3074 S ||1.9220 M ||114.44 S ||1.2109 S |
|1.2990 S ||1.9188 S ||114.07 M ||1.2030 T |
|1.2900 T ||1.9146 P ||111.96 S ||1.1980 S |
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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